What is Stamp Duty? How Much Do I Have to Pay?

Explainer Nov 16, 2022

What is Stamp Duty?
Stamp duty is a type of tax which is levied on any transaction in which a person is generating or extinguishing some rights/liability. A sale deed, gift deed, partition deed etc will have some stamp duty on it. It is a State tax and it varies with geographical area and in most states is paid in terms of the percentage of the total transaction value. It is important to remember that the final transfer of the ownership is considered complete only when the stamp duty and registration fees are duly and adequately paid. This fee differs from state to state and can be found here.

It is important to understand the difference between GST and Stamp duty. GST is levied on under-construction homes and Stamp duty is levied when property is transferred from one person to another. The Stamp Duty rate also varies  depending on the other various factors like the location, age and usage of the property, age and gender of the purchaser and the amenities associated with the property in question.

Payment of Stamp duty:

  • Traditional Stamp paper: The payment of stamp duty can be done by buying the stamp paper from any local vendor who sells them and filling it with all the details related to the transaction.
  • E-stamping: The whole world is shifting online so it is much easier to make the payment of the stamp duty online as well. The Government has started an online portal called stockholding.com to be the Central Record-keeping Agency for stamping of official documents-digitally. This reduces paperwork and speeds up the process as well. The security of the documents is ensured along with the cost and extra effort has been taken to make it user friendly as well. A unique code (UNI) is issued once the payment is made.
  • Agents: There are authorized franking agents who can be hired for getting the documents stamped. Banking employees may act as franking agents to pay stamp duty.

Stamp duty may also vary with various factors:

  1. Location of the property: The stamp duty is higher in urban areas and municipalities as compared to a rural area or somewhere on the outskirts.
  2. Age of the buyer: A senior citizen will pay a subsidised rate of the stamp duty as compared to a middle aged person.
  3. Gender: The stamp duty for a property to be registered under a female is much lesser than that compared to a male purchaser.
  4. Age of the property: The stamp duty also fluctuates with the age of the constructed building.
  5. Usage of the building: A building that is bought for commercial/business use will have a higher rate of stamp duty as compared to a property purchased for residential purpose.
  6. Amenities: With more amenities like gym, pool, elevator etc, the stamp duty goes higher as compared to those buildings where no such facilities are available.

There are some aspects one must keep in mind when it comes to stamp duty and the payment of it:

  • Stamp duty and registration charges are not included in the home loan that is given by the bank. This is always going to be an extra change the buyer bears. However, one may seek an additional personal loan to pay such fees.
  • The stamp duty is to be paid while registering the property. The calculated amount must be paid on the day the document is executed.
  • Most times it is the homebuyer that pays the stamp duty but in some cases it may be paid by both, the buyer and the seller (if it is agreed so in the legal agreement that is signed by both parties).
  • There is a penalty for the payment of inadequate stamp duty. This varies from state to state. Usually, the defaulter has to pay a penalty ranging from 8%-20% of the actual stamp duty or imprisonment or both. Indian Stamps Act, 1908 stipulates a term of 12 months of jail term for evaders/defaulters.
  • Stamp duty is deductible under section 80C of the Income Tax Act, up to a maximum limit of Rs 1.5 lakh

To calculate the stamp duty, you will need to calculate the property value. For this, you will have to factor in the circle rate in your city and this also varies from State to State. Multiple the circle rate of your area with the built up area of the property. Remember, the stamp duty is paid on this market value that is calculated rather than the actual value of the property transaction.

At TEAL, we are building the next generation of property due diligence using big data analytics and machine learning. We provide reliable information about property ownership, registration status, disputes, tax compliance history and all other information that you will need to make a safe and secure property investment. To learn how TEAL can help you in your journey, get in touch with us.

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